How do we rate a budget? We have to ask ourselves the question: What is the main objective of fiscal policy? Fiscal policy has to create growth as a first priority; it also should create conditions for macroeconomic stability in the medium term and as well as help in redistribution of income and resources. How does the budget perform on all the three priorities? As it happens, it performs fairly well.

The budget has put in big ticket expenditures into the rural areas. Two years of bad monsoons have created a huge slack in rural demand; with the agricultural growth rate at only 1.1%, demand for everything from FMCG to tractors and two-wheelers slowed down massively. By increasing the outlay on roads under PMGSY, supporting irrigation as well as MNREGA, the budget seeks to dovetail demand creation with supply, which is a good move.

But perhaps the biggest positive of the budget comes from anchoring the fiscal deficit at 3.5% of GDP. This, combined with the soft oil prices, now truly gives room for monetary easing, which could be a precursor for an investment pick up. Further, the budget creates only 2.5% revenue deficit, which is an indicator of better quality of spending, with lesser spending happening on the revenue account.

The tax-subsidy balances have been admittedly Robinhood-esque, with some market players going so far as to call them socialistic. Call it the Piketty effect or whatever, but with tax rebates being offered to those who do not own a home and exemptions for companies that are smaller, the budget does try its hand at correcting the inequality quotient rather well.

Rs.25000 crores is not enough for bank recapitalization; sharper reductions should have come through on corporate income tax, but after giving off Rs. 2.25 lakh crores to roads and rails, I guess there is not enough left for any other journey. All in all, a good budget.